The U.S. Treasury bill has a return of 2.84% while the S&P 500 is returning 10.84%. Your portfolio has an actual return of 14.76% and a beta of 1.31. What is the portfolio's Jensen's alpha?
A)−.47%
B)−.92%
C)1.37%
D)1.44%
E)1.57%

Question

Quizplus · Accepted Answer

Jensen's alpha = Portfolio Return - [Risk-free Return + Beta * (Market Return - Risk-free Return)]
= 14.76% - [2.84% + 1.31 * (10.84% - 2.84%)]
= 1.44%
Therefore, the answer is D) 1.44%.

The US Treasury Bill Has a Return of 2